VAT on Sale

of Goods
and Services
 I. Sale
1. Sale of goods and properties
2. Transaction deemed sale (TDS)

Coverage of 3. Sale of services and use or lease of

properties
VAT
II. Importation
Sale of Goods or Properties [Sec 106 (A)(1)]
There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, value-
added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.
1) The term “goods or properties” shall mean all tangible and intangible objects which are capable of
pecuniary estimation and shall include
a. real properties held primarily for sale to customers or held for lease in the ordinary course of trade or
business.
b. the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill,
trademark, trade brand or other like property or right;
c. the right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment;
d. the right or privilege to use motion picture films, tapes and discs, and
e. radio, television, satellite transmission and cable television time
 Tax Exclusive Method
• The vat is presumed not yet included in the tax base
amount. Such amount representing the taxable base
(exclusive of vat), whether gross sales or gross
Computation receipts, is multiplied by 12% vat rate. The resulting
product is the output vat due or output tax, as the
of VAT on case may be.
Sec. 106 (A)(1)
Sale of • The term “gross selling price” means the total
Goods amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange or the
goods or properties, excluding the value-added tax.
The excise tax, if any, on such goods or properties
shall form part of the gross selling price.
Computation of VAT on Sale of Goods
• Tax Exclusive Method
ie. Gross sales in a day P100,000

VAT = P100,000 x 12% = 12,000

• Tax Inclusive Method

ie. Gross sales of P112,000

Formula 1 : VAT = P112,000/1.12 x 12% = P12,000

Formula 2 : VAT = P112,000 x 12/112 = P12,000
Formula 3 : VAT = P112,000 x 3/28 = P12,000
Computation of VAT

• Actual sale of good, services or properties in

OUTPUT
the Philippines
VAT
• Transaction deemed sales
• Zero rated (0%) sale

Basis of 12% VAT

• Sale of goods = Gross sales Basis of 12% VAT
• Sale of service = Gross receipts • Sale of real properties = the highest
amount among selling price, fair
• Sale made by a dealer in market value provided by the
securities = Gross income city/provincial assessor, and the zonal
value provided by the BIR
Sale of Goods
Computer Corp., a vat registered dealer of ICT equipment, provided the
following data for the last quarter of 2020.

• Sales, total invoice value P5,600,000

• Purchases, net of input taxes 3,500,000
• Deferred input vat from 3rd Q 30,000

How much is the vat payable for the 4th quarter

Computation of VAT Payable
Computer Corp.
Output VAT (5.6m x 12/112) P600,000
Input VAT (3.5m x 12%) (420,000)
Deferred input VAT, 3rd Q ( 30,000)
Vat payable P150,000
Sale of Services [Sec. 108(A)(1)]

The phrase ‘sale or exchange of services’ means the performance of all kinds of services in
the Philippines for others for a fee, remuneration or consideration, including those
performed or rendered by construction and service contractors, stock, real estate,
commercial, customs and immigration brokers, lessors of property, whether personal or
real, warehousing services, lessors or distributors of cinematographic films, persons
engaged in milling processing, manufacturing or repacking of goods for others, proprietors,
operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts;
proprietors or operators of restaurants, refreshment parlors, cafes and other eating places,
including clubs and caterers; dealers in securities; lending investors, transportation
contractors on the transport of goods or cargoes, including persons who transport goods or
cargoes for hire, another domestic common carriers by land, air and water relative to their
transport of goods or cargoes, services of franchise grantees of telephone and telegraph,
radio and television broadcasting and all other franchise grantees except those under
section 119 of this Code; services of banks, non bank financial intermediaries and finance
companies and non-life insurance companies (except their crop insurances, including
surety, fidelity, indemnity and bonding companies, and similar services regardless of
whether or not the performance thereof calls for the exercise or use of the physical or
mental faculties.
Sale of Services
• JML Consultancy Services, a vat registered accounting firm, provided the
following data for the last quarter of 2020.

• Revenues, total invoice value P5,600,000

• Collections, gross 4,704,000
• Purchases of supplies, gross 3,920,000
• Deferred input vat, 3rd quarter 40,000

• How much is the vat payable for the 4th quarter?

Computation of VAT Payable
JML Consultancy

Output vat (P4,704,000/1.12 x 12%) P504,000

Input vat (P3,920,000/1.12 x 12% (420,000)
Deferred input vat, 3rd quarter ( 40,000)
VAT payable P 44,000
 Under section 106(B) of the Tax
Code, certain transactions which
are not actually sales because of
the absence of actual exchange
between the buyer and the seller,
Transactions are considered or included in the
Deemed Sale term “sale” for value added tax
purposes.
 1. Transfer, use or consumption , not in the course of trade or
business of goods or properties originally intended for sale or for
use in the course of business. Transfer of goods or properties not
in the course of trade or business can take place when the VAT
registered person withdraws goods from his business for his
personal use.

Transactions 2. Distribution or transfer to:

• Shareholders or investors share in the profits of VAT registered
Deemed Sale person;
• Creditors in payment of debt.
3. Consignment of goods if actual sale is not made within 60 days
following the date such goods were consigned; and
4. Retirement from or cessation of business with respect to all goods
on hand, whether capital goods, stock-in-trade, supplies or
materials as of the date of such retirement or cessation, whether
or not the business is continued by the new owner or successor.
This Photo by Unknown Author is licensed under CC BY-ND